Overnight the Shanghai Composite stumbled 6.5% after China's stock trades tax hike, leading to fears that, as in February, a big drop there could lead to declines elsewhere, despite the market being virtually shut to foreign investors. There were lighter losses on bourses in Tokyo and London.

The losses in China followed gains in U.S. markets on Tuesday, when investors returned from a three-day weekend to find a long list of new deals.

Analysts said the follow-through in New York trade from Shanghai's selloff could be limited, as the U.S. market in recent weeks has become more relaxed about developments in the booming Chinese equities market.

"This is reminiscent of what happened in late February," said George Yared of Yared Investment Research, referring to a major U.S. market correction triggered by another Shanghai selloff. "There was heavy discussion then too of making taxes on stock trades more stringent."

" I wonder if we will see follow through this time," Yared said. "What interesting is that we saw this game already and we were victimized before. So this time we might take it as a 'head fake'."

The latest ADP employment report suggested that jobs growth this month will come in below the 150,000 new jobs forecast by MarketWatch. ADP said private-sector employment rose by 97,000 this month, pointing to an overall increase of about 123,000 jobs.

The nonfarm payrolls figure will be released on Friday.

Stocks of note

Futures market operator Intercontinental Exchange Inc. is continuing with its efforts to take over CBOT Holdings. According to the Wall Street Journal, ICE has reached a deal, valued at $665 million, that would settle a dispute between CBOT parent of the Chicago Board of Trade, and its rival, the Chicago Board Options Exchange.

That deal can go into effect only if ICE wins CBOT. Both ICE and the Chicago Mercantile Exchnage had bid for the CBOT, whose management factors the Chicago exchange.

The shareholder-advisory serve Shareholder Services is urging Biomet Inc. shareholders to reject a $10.9 billion private-equity deal for the company, the same newspaper reported.

Holders of the Warsaw, Ind., designer of artificial knees are set to vote June 8 on a bid by a group including Blackstone, Goldman Sachs, Kohlberg Kravis Roberts and TPG Capital.

Elsewhere, Cantor Fitzgerald is offering $9.75 a share for stock of eSpeed, which it plans to combine with BGC Partners.

Technology retailer CDW will be bought by buyout firm Madison Dearborn for about $7.3 billion.

Outside the deal sphere, Microsoft is coming out with a new table-top computer for hotels and casinos.

International Business Machines told the Wall Street Journal that it has spent $12.5 billion to buy back its stock in an accelerated buyback program. The repurchase allows a company to raise its earnings per share more rapidly than it would using a conventional buyback.

In the retail sector, Coldwater Creek Inc. could benefit from its report of higher-than-forecast earnings, while bookseller Borders Group could fall after it announced a larger-than-expected loss.

Other markets

The weakness in global equities was sparking interest in low-risk Treasurys. The benchmark 10-year Treasury ote last was up 5/32 at 97-5/32 with a yield of 4.866%. Overnight there were also rallies for Japanese and German bonds.

A badly-received auction of 2-year notes on Tuesday renewed worries about foreign central banks backing off U.S. assets and sent yields rallying. There will be a Treasury auction of new 5-year notes this afternoon.

The dollar was mixed in the early going, as it last traded down 0.08% at 121.62 yen. The euro last was up 0.2% $1.3422. Currencies investors are eager to see how this afternoon's FOMC minutes impact the dollar.

Commodities were under pressure, as the front month gold contract last fell $3 to $654.10 an ounce and crude futures were $1.30 lower at $64.97 a barrel. Analyst John Nadler of Kitco said gold prices were hurt by the new Chinese speculation curbs and concerns about the contents of the FOMC minutes. The meeting notes will come out at 2. p.m. Eastern.